You may not want Queensland, but Queensland wants you

For those Cats who are not residents of Queensland, yesterday’s Queensland budget should worry you and worry you a great deal.

Based on Gross State Product, Queensland is Australia’s 3rd largest state accounting for about 18.2% of the Australian economy in FY17 (between VIC at 23.6% and WA at 13.8%). So let’s just say that Queensland is systemically important to Australia.

If it is generally agreed that the debts of Australian banks have an implied guarantee from the Commonwealth Government, then it is not much of a stretch to say the same implies to the debts of the states.

the Debt Action Plan is going so well that public-sector debt will soar by $13 billion, or nearly 20 per cent, over the next four years.

A 20% debt surge over 4 years! Is the Queensland government being advised by Wayne Swan and Ken Henry?

And this is underwritten by surging commodity export volumes and prices – you know those evil carbon based energy sources of coal and LNG. But what happens if there is a shock to commodity prices and or volumes? Well consider what happened in 2010.

Back in the good old days, with Julia Gillard running the show in Canberra and Anna Bligh running the show in Brisbane, there was a large flood in Queensland. The consequences were quite significant. But the economic consequence for Queenslanders were worse than should have been because the Queensland government and Queensland citizens did not properly insure themselves. And they are still under-insuring themselves.

But did Queensland pay the price for not having proper insurance? Nope. Instead, a flood levy that was paid by all Australians and not just Queenslanders was implemented to bail them out.

So what “insurance” is the Queensland government taking out to protect against the risk of commodity market volatility? None. Instead they are Jacking up debt and spending. This is called the Jackie Strategy named after Queensland Treasurer Jackie Trad. Although fellow Queenslanders Swan and Rudd may have grounds for an intellectual property claim – if you can believe that Rudd-Swan governance was intellectual.

33 Responses to You may not want Queensland, but Queensland wants you

The worst back then was exemption from the flood levy was based on whether or not you had accessed the emergency flood assistance. This assistance was provided on the basis you were without power or isolated for three days as I recall.
People who had not accessed the assistance: because they didn’t need it, others were worse than them etc. promptly went and got the handout to avoid having to pay the flood levy.
This meant they got to enjoy free money they didn’t need, which is addictive. You can imagine what happened next disaster event.

Windows 10 has crashed again, and all my efforts to resuscitate the computer have failed. In fact they have made it worse.
Using the ” Restore to New Copy” route, I have managed to format my Ultimate Doomsday Backup HD, as well as my 12 Terabyte Array.
Another disaster for Win 10.
Therefore, the competition to guess when Australia gets to the Trillion dollar debt data is gone. Lost. It is dead Data.
With Godawful plumage.
Pining for the fjiords.
Sorry.

Not only that but they’re blowing big on more “renewable” boondoggles, planning on sticking us with 50%+ of expensive, ugly and unreliable installations flogged by blatant grifters. All the while relying on that evil black stuff to prevent them falling over a fiscal cliff. A fair few voted for these malfeasant cretins, however the mouth-breathers who voted for the mental and moral defectives of PHON put these fuckers into office.

If nothing else, Hanson and one nation should be injected with battery acid.

Federal gross debt surged by 72% under Liberal governments in the three years from 2014-2017.

It sounds worse because debt started relatively low. But NET debt was minus 3.3% of GDP in 2007 ie less than zero, 13% in 2013 and 19% now. Labor tends to use GROSS rather than NET debt figures because it makes the increase look worse than if you use net debt figures.

NET debt went from minus 3.3% of GDP in 2007 to plus 13% under Rudd/Gillard. How do you put a percentage increase on that?

Labor tends to use GROSS rather than NET debt figures because it makes the increase look worse than if you use net debt figures.

When Labor was in government they were happy to use nett debt figures to make it look a bit better for themselves. They also counted the NBN as being “off balance sheet” which is total crap.

Gross debt is what Australians are signed up to pay back. Gross debt is what the interest payments are calculated against, and most of what governments try to balance against it are not salable items anyhow.

What happened with debt is the ALP with Rudd/Gillard/Rudd got the debt wagon pushed hard in the direction of the cliff and rode that wagon for the benefit of all the people they could have the loot over to. Then Abbott and Hockey pointed at that and shouted “budget emergency”, and the voters believed them so they kicked out the ALP. With a landslide victory, Abbott got into a position to actually do something, went to the barricades with a big six bucks charge for visiting the doctor but then went to water at the first bad Twitter reaction. I mean six bucks, cheaper than a hamburger and they howled and moaned over it. Abbott got rolled, Turnbull jumped aboard the debt wagon and furiously rearranged the deck chairs, pretending to be a very important person. It’s still heading for the cliff, we have about ten years left and kapow: Australian sovereign debt crisis. Suddenly the NBN is going to be right back on the balance sheet in a big way.

All insurance does is spread the risk of loss. As such the State itself is the best insurer of all spreading the risk across all citizens, possibly with some reinsurance, although even this shouldn’t be necessary given the size of the Queensland economy.

I’m not sure exactly what arrangements cover the Federal government stepping in to cover natural disasters, however I suspect it is not in Queensland’s interests to attempt to cover losses but rather simply put their hand up for the Feds.

Additionally all government disaster relief has additional negative effects – discouraging people from taking out adequate private insurance against loss and masking the true cost of developments exposed to extreme climatic risks (also true of floods and bushfires).

No. Insurance does not spread the risk of loss. It spreads the cost of loss across a pool. But that requires everyone in the pool to put money aside against the risk.

I’m not sure exactly what arrangements cover the Federal government stepping in to cover natural disaster

Do you know why you are not sure? Because there are no federal arrangements. Natural disasters are a state matter.

all government disaster relief has additional negative effects

There is disaster relief and there is moral hazard.

It is one thing to give food, temporary shelter and blankets. It is another thing for government to rebuild house in flood plane and to compensate those without insurance at 100c in the $1 while leaving those responsible with insurance to battle it out with the insurance companies.

I’m not sure exactly what arrangements cover the Federal government stepping in to cover natural disasters, however I suspect it is not in Queensland’s interests to attempt to cover losses but rather simply put their hand up for the Feds.

There areestablished arrangements with predefined measures and gradually increasing federal (financial) intervention depending on the scale of the disaster: the natural disaster relief and recovery arrangements (NDRRA).

Also, what Spartacus is talking about is not so much state government insurance of its infrastructure, which was also an issue back then as I recall given the state had become a big debtor compared to when the initial decision to self insure was made, but individual property owners not insuring.

It is one thing to give food, temporary shelter and blankets. It is another thing for government to rebuild house in flood plane and to compensate those without insurance at 100c in the $1 while leaving those responsible with insurance to battle it out with the insurance companies.

When Labor was in government they were happy to use nett debt figures to make it look a bit better for themselves. They also counted the NBN as being “off balance sheet” which is total crap.

Here is the reason the rate of increase between NET and GROSS debt is different. When Howard was running surplus budgets there was no need to borrow money. Rather than close the bond market down the Howard govt arrange to have $50-$55B of govt bonds on issue all the time even though the money was not needed to fund the budget. NET debt in 2007 was minus $40B but GROSS debt was plus $50B. The graph shows gross debt hovering around $50-$55B for years until labor started borrowing again

And then I lived directly across the road from a booth. What’s that tell you about the selection on offer? I believe the fat ugly rug-muncher beat the mincing radish and the loon with garden debris in its hair.

“But what happens if there is a shock to commodity prices and or volumes? ”

Perhaps from the discovery that the Dragon’s Paw Republic of Korea has useful reserves of some/all of the minerals currently being dug out of the ground in Queensland – deals will be done quickly in the Pyongyang Trump Towers…….

Sparty, you are missing Joe Ludwig from your rogues gallery of Rudd-era Queenslanders who hoovered up money from the rest of Australia. He was (under Gillard) Minister Assisting the Attorney-General on Queensland Floods Recovery. Minister assisting shovelling money into Queensland, I guess.

The flood levy was very bad policy, but the flood payments also saw the deep-sixing of the cash for clunkers plan and payments for stupid ideas like Adelaide’s O-Bahn and other infrastructure monstrosities. So it wasn’t all bad.

All insurance does is spread the risk of loss. As such the State itself is the best insurer of all spreading the risk across all citizens, possibly with some reinsurance, although even this shouldn’t be necessary given the size of the Queensland economy.

Au contraire: this ignores the small issue of moral hazard. Spreading the risk across all citizens insulates those taking higher risks from the consequences, such as building on a goddam flood plain! Every person who wants insurance should buy their own and see what it costs, and if they chose not to, should NOT be bailed out by the taxpayer when the next flood comes

Liberty Quote

The state schools deprived working-class parents of the power to withdraw their children from the worst. The private school parents know that their power to move is the source of their influence on their schools. The power of low-income people to withdraw their children from poor schools, in practice or by intention, was taken from them by the state.